It’s a testament to the mixed signals of the Democratic Party on taxes and the end-of-the-year fiscal situation that Matt Yglesias can talk to the same Senator on the same weekend as I and get a completely different impression. He basically saw no appetite for letting the Bush tax cuts expire completely and then coming back with an “Obama tax cut” package, while I did, particularly from Sen. Sheldon Whitehouse.

It is worth pointing out, however, that while Matt and I and others were reading tea leaves in Providence with Senators on the more liberal side of the spectrum, the ones more interested in using the fiscal slope as an opportunity to put together a massive deficit reduction package were making their move:

In an ornate room in the Capitol last Wednesday night, the Democratic senators who could hold the key to preventing a fiscal train wreck gathered for dinner and a talk with economists about their options for dealing with nearly $8 trillion in combined tax increases and spending cuts that are to be put in place automatically in January [...]

What separated the unannounced Wednesday session, organized by Senator Dianne Feinstein of California, from the earlier ones was the collective weight of the participants: the Senate’s No. 2 and No. 3 Democrats, Richard J. Durbin of Illinois and Charles E. Schumer of New York; the chairman of the Finance Committee, Max Baucus; and the chairman of the Budget Committee, Kent Conrad.

This looks like Jeff Merkley’s worse nightmare coming to pass, with a top-level secret huddle rather than a public process. Max Baucus, who confirmed the meeting, also said that the Senate needs to not “box itself out” with legislation too quickly. Meaning that the meetings will continue in back rooms without public scrutiny. One Senator, Johnny Isakson (R-GA), said that even talking about the talks’ existence would be a problem.

Now, it does sound like Republicans weren’t involved in this meeting, suggesting that Democrats are largely formulating strategy, which would be welcome. The story also reports:

1) 35 Senators, in both parties, met last Tuesday with Robert Zoellick, the outgoing President of the World Bank, and Bill Dudley, the outgoing President of the NY Fed.

2) The Wednesday dinner included Mark Zandi and Robert Reischauer.

3) Jon Kyl still wants more than anything to avoid the defense trigger, and to the idea of using tax hikes to fill that space, he said “we think that’s a bad idea, but let’s sit down and talk.”

4) Baucus has a speech this week to the Bipartisan Policy Center where he’ll lay out some ideas on taxes. (UPDATE: That Baucus speech was today, and he called for more revenue from the tax code.)

5) Bob Corker (R-TN) will introduce a bill on taxes and safety net spending soon.

6) “Senate Democrats gathered on Thursday with Andrew Kohut, president of the Pew Research Center for the People and the Press, to look over polling on their political strength defending entitlements like Medicare and Social Security.”

7) An interesting paragraph that gets slipped in at the end, as either Mark Zandi’s plan or the Democratic plan discussed at the meeting:

But if the tax cuts are extended for households with incomes below $250,000, Medicare payments remain the same, the alternative minimum tax is kept at bay and the automatic spending cuts are cut in half, the economic hit could be held to 1.5 percentage points.

I assume that everything else would be left to expire, then, including the payroll tax cut and extended unemployment insurance. Sounds like a stance Zandi or some force in the party wants them to live with. You’ll notice that the $250,000 dividing line is in there, not Nancy Pelosi’s $1 million.

8) More Republicans talking about taxes, like Kyl and Lindsey Graham (the uber-hawkishness could bring them to the table here). But most important, here are REPUBLICANS accepting the Democratic strategy of the “Obama tax cuts”:

Other Republicans have quietly suggested that all of the Bush-era tax cuts would have to lapse temporarily. That way, reinstating most — but not all — of them would be scored as a tax cut, both by the Congressional Budget Office and by Americans for Tax Reform, a group led by Grover Norquist that is the keeper of the “no new taxes” pledge virtually every Republican has signed.

One senior Republican, speaking on the condition of anonymity to avoid crossing Mr. Norquist, said that as the deadline approached, the “pledge” would be dwarfed by the “cliff.”

“You look at what’s getting ready to happen, a $5 trillion tax increase, nobody wants that to happen,” the senator said. “The pledge becomes irrelevant on Dec. 31.”

It takes Republicans to figure out a Democratic strategy on taxes. I happen to disagree that the Clinton tax rates were too high, and I would want to sunset the Obama tax cuts as well. But at least someone figured a way out of Norquist’s box: Republicans.

Now, none of this means that we’ll see higher-than-Bush tax rates come 2013. In fact, if it’s true that Wall Street lobbyists are getting involved, look out. But I know that, when people talked about letting all of the tax cuts expire in 2010, nobody in Washington will touch it. Now they’re at least coming around to the idea.